Case T‑486/18 RENV
Danske Slagtermestre
v
European Commission
Judgment of the General Court (First Chamber) of 10 April 2024
(State aid – Contributions scheme for the collection of waste water – Complaint from a competitor – Decision finding no State aid at the end of the preliminary examination stage – Requirement of impartiality – Objective impartiality – Concept of ‘advantage’ – Market economy operator principle – Ex ante incremental profitability analysis – Commission Notice on the notion of State aid)
1. Fundamental rights – Charter of Fundamental Rights – Right to good administration – Requirement of impartiality – Objective impartiality – Commission decision finding no State aid in relation to a national contributions scheme for the collection of waste water – Decision prepared and signed by a member of the Commission who had cooperated, as a national minister, in the adoption of the national scheme at issue – Member of the Commission who publicly adopted a position, in her capacity as a national minister, in support of the national scheme at issue – Situation such as to give rise to a legitimate doubt with respect to possible bias on the part of that member of the Commission – Infringement of the requirement of impartiality
(Charter of Fundamental Rights of the European Union, Art. 41(1))
(see paragraphs 26-44)
2. Aid granted by a Member State – Concept – Grant of an advantage to the beneficiaries – Criteria for assessment – State intervention that is economic in nature – Assessment in accordance with the market economy operator principle
(Art. 107(1) TFEU)
(see paragraphs 51-57)
3. Aid granted by a Member State – Concept – Assessment in accordance with the market economy operator principle – Assessment having regard to all factors relevant to the transaction at issue and its context – Discretion of the Commission – Self-imposed limitation of that discretion by the adoption of a notice on the notion of State aid – Obligation on the Commission to apply the market economy operator principle in compliance with the method of analysis set out in that notice – Infringement
(Art. 107(1) TFEU; Commission Notice 2016/C 262/01, para. 228)
(see paragraphs 66-91)
4. Aid granted by a Member State – Concept – Assessment in accordance with the market economy operator principle – Information needed for an assessment – Profitability prospects of the measure at issue
(Art. 107(1) TFEU)
(see paragraphs 92-98)
Résumé
The General Court, hearing the case on referral back from the Court of Justice, annuls the decision of the European Commission (1) by which the latter found that the Danish legislation regarding fees payable to waste water treatment operators did not give rise to State aid in favour of large slaughterhouses. In that context, the General Court provides clarification regarding, first, the requirement of impartiality on the part of the Commission and, second, the application of the market economy operator principle in a context such as that of the present case. On the second point, the Court draws attention, in addition, to the obligation on the Commission to comply with the criteria laid down in its Notice on the notion of State aid. (2)
By a law adopted in 2013 (3) (‘the 2013 law’), Denmark replaced the system under which there was a single charge per cubic metre of water for all water consumers connected to the same waste water treatment plant with a degressive ‘staircase’ model providing for a rate on the basis of the volume of waste water discharged (‘the staircase pricing model’). This new pricing model provides, in essence, for a reduction in the rate per cubic metre from a certain volume of waste water discharged, which has the effect of reducing the charges payable by the biggest water consumers.
Danske Slagtermestre, a trade association which claims to represent small butcher’s shops, slaughterhouses, wholesalers and processing undertakings in Denmark, brought a complaint before the Commission alleging that the 2013 law had granted State aid to large slaughterhouses in the form of a reduction in contributions for the treatment of waste water.
By decision of 19 April 2018, the Commission held that the staircase pricing model introduced by the 2013 law did not confer any special advantage on specific undertakings and did not therefore constitute State aid within the meaning of Article 107(1) TFEU. In support of that conclusion, the Commission, referring to its Notice on State aid, took the view that a market economy operator would also have implemented the staircase model.
Danske Slagtermestre brought an action for the annulment of that decision before the General Court.
By order of 1 December 2020, (4) the General Court dismissed the action as inadmissible on the ground that Danske Slagtermestre lacked standing to bring proceedings. On appeal, the Court of Justice held that that professional association did have standing to bring proceedings; it annulled the abovementioned order and referred the case back to the General Court for it to examine it as to the substance. (5)
Findings of the Court
In the first place, the General Court examines the plea for annulment alleging that the Commission infringed the requirement of impartiality laid down in Article 41(1) of the Charter of Fundamental Rights of the European Union. According to the applicant, that requirement was infringed when the contested decision was adopted, since the Commissioner responsible for competition, who signed it, had also cooperated, as a minister of the Danish Government, in the adoption of the 2013 law.
In that regard, the Court recalls that it is for the institutions, bodies, offices and agencies of the European Union to comply with the requirement of impartiality, in particular as regards its component relating to objective impartiality, according to which there must be sufficient guarantees to exclude any legitimate doubt as to possible bias on the part of the institution concerned, appearances possibly also being of importance.
Having clarified that matter, the Court notes, first, that at the time of the submission of the draft giving rise to the 2013 law and at the time of its adoption, the Commissioner responsible for competition who signed the contested decision was Minister for the Economy and the Interior and Deputy Prime Minister of the Kingdom of Denmark. Second, since the staircase pricing model was expected to have an impact on the expenditure of individuals and undertakings, it is reasonable to consider that it could have been proposed in agreement with that minister. Third, the Commissioner in question had taken a position at national level, publicly and explicitly, in favour of the staircase pricing model.
In the light of those factors, the Court takes the view that it may legitimately be considered that the Commissioner in question had an interest in the contribution for the treatment of waste water provided for by the 2013 law not being called into question on the ground that it was unlawful under the rules of EU law concerning State aid.
The Court examines, next, whether the procedure for the adoption of the contested decision offered sufficient guarantees to prevent such an interest from vitiating that procedure by an infringement of the requirement of impartiality.
Regarding that matter, the Court points out that, despite the collegiate nature of the method of adopting decisions within the Commission, the Commissioner in question was not only responsible for the preparation of the contested decision but was also the sole signatory of that decision.
Such a situation is such as to give rise, in the eyes of third parties, to a legitimate doubt with respect to possible bias on the part of that Commissioner, irrespective of her conduct. Therefore, the procedure leading to the adoption of the contested decision did not offer sufficient guarantees of objective impartiality.
In the second place, the Court examines, for the sake of completeness, the plea for annulment alleging that the Commission infringed Article 107(1) TFEU by wrongly concluding that there was no advantage conferred on certain undertakings by the introduction of the staircase pricing model.
After confirming that the Commission was right to have examined the existence of an advantage in the light of the market economy operator test, the Court observes, first of all, that it was thus for the Commission to determine whether the undertakings that benefited from reduced tariffs for the treatment of waste water would have obtained a comparable advantage from a normally prudent and diligent private operator, particularly taking account of its prospects for profitability.
Since the Commission applied, for the purposes of that examination, the ex ante profitability analysis method set out in paragraph 228 of its Notice on the notion of State aid, the Court points out, furthermore, that, in adopting that notice, the Commission imposed a limit on the exercise of its own discretion as regards the clarifications it provided in that notice on the concepts linked to the notion of State aid. In accordance with paragraph 228 of that notice, the Commission was therefore required to examine, for each undertaking connected to a waste water treatment plant, whether the contribution paid under the staircase pricing model was capable of covering the costs arising from its use of the infrastructure in question.
Given that the Commission based its examination solely on average data on total costs and revenues of 6 out of the 98 Danish municipalities, it failed to have regard to paragraph 228 of its Notice on the notion of State aid and, consequently, to the limits which it imposed on its discretion in adopting that notice.
In any event, even if the Commission could have applied the ex ante profitability analysis method without carrying out an examination of each user, it should at the very least have been able to verify that the staircase pricing model in all probability made it possible to allocate to users the marginal costs, that is to say, the costs directly incurred by their use of a waste water treatment plant.
Yet, in the contested decision, all the costs which were not linked to the quantity of water consumed were considered to be fixed costs and, therefore, were shared among all the various users, even if such costs existed merely because of the presence of a specific user on the network. The Commission could not therefore assert that it had verified that the contribution for the treatment of waste water, determined on the basis of the staircase model, enabled the plants to cover the incremental costs in the medium term.
Consequently, the Commission disregarded the limits that it had imposed on its discretion in adopting the Notice on the notion of State aid when it considered that the contribution for the treatment of waste water was consistent with the market economy operator principle.
Next, the Court recalls that, where an intervention by a public operator disregards any prospect of profitability, even in the long term, it cannot be regarded as complying with the market economy operator principle. Despite this, in the contested decision, the Commission found that the discounts introduced by the staircase pricing model could comply with the market economy operator principle on the sole condition that the contribution for the treatment of waste water covered the costs incurred by the operators of waste water treatment plants.
Moreover, by failing to examine whether the application of the staircase pricing model enabled the operators of waste water treatment plants to retain a profit margin, even though it was common ground that that new pricing system leads, on the whole, to a reduction in the amount of the contribution for the treatment of waste water compared with the unitary fee system which it replaced, the Commission, for a second time, disregarded the requirement of profitability and, therefore, misapplied the market economy operator principle. Thus, the Court notes that the ex ante profitability analysis defined in paragraph 228 of the Notice on the notion of State aid involves the national measure under examination by the Commission contributing ‘incrementally’ to the profitability of the operator of an infrastructure, so that, in order to comply with the market economy operator principle, that measure must increase such profitability, even in the long term, and not decrease it.
Lastly, the Commission was wrong to take the view, in the contested decision, that a market economy operator would have taken account of the fact that the maintenance of high charges for water treatment entailed a risk that the largest water consumers would choose to disconnect from the centralised waste water treatment network, since the risk of such disconnection was hypothetical and not sufficiently substantiated.
Therefore, the Court concludes that the Commission infringed Article 107(1) TFEU and paragraph 228 of the Notice on the notion of State aid by finding that the contribution for the treatment of waste water did not confer any advantage on the ground that it would have been decided upon by a market economy operator.
In the light of all the foregoing, the Court annuls the contested decision.